» Monday, April 6, 2009


Asked to comment on the Institute for Fiscal Studies budget forecast, the PMS said the Chancellor would update his forecasts in the Budget. He said generally on the economy it was worth bearing in mind that since the autumn we had had a very large reduction in global trade.

The IMF forecast for world trade for 2009 had fallen by five per cent meaning around a trillion dollars less demand for exports than the IMF was forecasting just six months ago. That had clearly had a big impact on all of the world’s economies; in Japan exports were down 49 per cent, in Germany exports were down 21 per cent, and in France exports were down 21 per cent.

Falling exports had an impact on industrial production; in Japan industrial production was down 39 per cent, in Germany it was down 19 per cent, and in France and Italy it was down 14 per cent. The impact had also been felt in the UK with industrial production down 11 per cent.

Clearly, we hd seen a much deeper global recession than previously forecast by organisations like the International Monetary Fund and the Organisation for Economic Co-operation and Development (OECD) last autumn, and of course that was going to have an effect on all countries including Britain.

What we had also seen was that many other countries were hit harder than Britain so in terms of the out turns we had seen steeper falls in GDP in Japan, and Germany, with falls in the US and UK around the same at 1.6 per cent.

When the OECD published their forecasts last week it showed the UK was not as affected as, for example, Germany, Japan, Italy the US and others.

Clearly this was a global recession, which had been deeper than most people had predicted this time last year and this had an effect on the UK, and that had an impact on tax receipts.

Asked whether the Government was still claiming it was better placed than other countries to weather the recession, the PMS said the out turn data for GDP showed a number of other countries had fared worse than Britain. He said we had seen that in GDP figures, in figures for exports and in figures for industrial production.

He said this would not be any consolation for people losing their jobs in Britain but the Government was determined to do everything possible to ensure the recession would be as short as possible not just in Britain but across the world.

The PMS said we would also reject the assumption that there was a distinction between what happened at the G20 summit and what happened in Britain. The reason the Prime Minister put so much effort into ensuring the G20 was a success was precisely because Britain was an open economy, a trading economy and therefore what happened in the rest of the world had a direct impact in Britain.

Asked how much of the positive data the Prime Minister attributed to the weak sterling and if he saw a silver lining, the PMS said that the Government’s assessments would be updated in the Budget.

When asked if falls in industrial production were smaller because we started from a lower base, the PMS said that wasn’t true as industrial production in the UK was the equivalent if not slightly larger than industrial production in France.

Asked about the comments made over the weekend about the real value of monetary commitments made at the G20 Summit, the PMS said that the over-whelming majority of economists and serious commentators believed the conclusions from the G20 Summit were substantive.

original source.

Briefing took place at 11:00 | Search for related news

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